Innovation Drives Upside for Insurers Like Hartford Financial

Apr. 7.11 | About: Hartford Financial (HIG)

Hartford Financial (NYSE:HIG) is an insurance and wealth management company that serves businesses and consumers by providing products and solutions to protect their assets and income from risk and manage their wealth and retirement needs. The company competes with AIG (NYSE:AIG) and MetLife (NYSE:MET) in providing life and property & casualty insurance in the U.S. and had nearly 1.4% market share in the U.S. individual life insurance market in 2010.

We have a price estimate of $23.68 for Hartford Financial stock, roughly 15% below market price.

The life insurance market in the U.S. is highly competitive and insurers need to innovate in order to cater to the evolving needs of consumers and separate their products from the competition. Hartford Financial is offering a life insurance rider that provides eight years or more of income to life insurance customers living beyond age 90. This offering is the first of its kind in the industry and was comes after a survey showed that Americans are growing increasingly concerned about running out of retirement income.

Chart created using Trefis' app

The LongevityAccess Rider

The offering is labeled as the LongevityAccess Rider and can be added to an existing life insurance policy from Hartford Financial. Should a policyholder live beyond 90, he/she will be able to withdraw an amount equal to 1% of their death benefit per month for eight years. Even if the customer eventually withdraw the full benefit during their lifetime, their policy’s beneficiaries will still receive a guaranteed residual death benefit. [1]

Hartford Financial has been prolific in introducing innovative products to the market. Previously, the company launched the LifeAccess rider that helps protect against the cost of becoming chronically ill. The rider is extremely popular among baby boomers.

Market Share Upside from New Products

The availability of new and innovative products can help lift an insurer’s market share. Hartford Financial’s market share in U.S. life insurance has seen slight improvement over the past few years, growing from about 1.2% in 2008 to 1.4% in 2010. If the company can continue to grab higher share of the market in the coming years, there could be upside to our $23.68 price estimate.

You can examine upside scenarios to Hartford’s market share, and see the potential impact on the company’s stock value, by dragging the trend line in the interactive chart above.

See our complete analysis of Hartford Financial stock here

  1. New Life Insurance Innovation from The Hartford Provides Eight Years or More of Income to Policyholders Who Live to Age 90 and Beyond, The Hartford

Disclosure: No positions